Rees and another v Gateley Wareing (a firm) and another

Solicitors – Conditional fee agreements – Enforcement – Courts and Legal Services Act 1990 – Appellants instructing respondent firm of solicitors in connection with dispute over development project – Fee agreement providing for respondent to charge percentage of sums recovered for appellants – Whether that agreement unenforceable as “conditional fee agreement” not meeting statutory requirements of section 58 of 1990 Act – Whether respondent performing “litigation services” – Appeal allowed In the 1990s, the appellants set up certain arrangements with a view to unlocking the development potential of 100 acres of farmland that they owned; by a series of transactions, the land was transferred in turn to various companies with agreements regarding payment. By 2001, the appellants were concerned that they were not receiving due payment and they consulted the respondent firm of solicitors on the matter. By 2002, one of the companies involved in the arrangements had become insolvent and another was demanding payment of more than £6m from that company. In those circumstances, the appellants instructed the respondent to act for them on the terms of an August 2002 fee agreement under which the respondent was to charge a percentage of any moneys recovered on the appellants’ behalf. At the appellants’ request, the respondent oversaw and assisted in the preparation of a claim by one of the companies against a party who had advised on the arrangements for the development. The appellants also brought their own negligence claim against a further party, as assignees of the company’s cause of action, but those proceedings were discontinued. A dispute arose as to the respondents’ fee entitlement. The appellants contended that the August 2002 agreement was unenforceable since it failed to meet the statutory requirements of section 58 of the Courts and Legal Services Act 1990 for a “conditional fee agreement”, defined as an agreement “with a person providing… litigation services which provides for his fees… to be payable only in specified circumstances”. In the court below, the judge found in favour of the respondent, holding that the terms of the respondent’s retainer did not oblige it to conduct litigation. He found that the parties had agreed that the respondent’s work on the discontinued claim would not be conducted on the terms of the August 2002 agreement. The appellants appealed. Held: The appeal was allowed. There was a difference between a “contingent fee” and a “conditional fee”: the former was a fee under which a lawyer would recover some of the client’s winnings, while the latter was a fee under which a lawyer would recover his normal fee, with or without a percentage uplift, in certain events. The fee under the August 2002 agreement was a contingent fee. It was not validated by section 57 of the Solicitors Act 1974, which permitted a solicitor to agree a fee based on a percentage only in relation to “non-contentious business”. Although the litigation on the discontinued claim had not been carried out under the 2002 fee agreement, the respondent’s work on the company litigation was covered by that agreement. That work was contentious in nature since it was done by the respondent in its capacity as a solicitor for the purposes of the litigation, even though the respondent did not have overall conduct of the litigation and was not the solicitor on the record. It followed that the August 2002 agreement would be unenforceable in relation to that work if it was a “conditional fee agreement” as defined. For that purpose, it was unnecessary to decide whether the fee agreement, properly interpreted, covered the provision of litigation services. If the respondent in fact provided litigation services on the terms of that retainer, it was unenforceable: Gaynor v Central West London Buses Ltd [2006] EWCA Civ 1120; [2007] 1 WLR 1045 applied. On the proper application of the legislation, the August 2002 agreement was a conditional fee agreement within section 58 of the 1990 Act. The statutory policy was to prohibit contingent fees for the provision of litigation services. The judge had erred in drawing a distinction between solicitors who had conduct of the litigation and those who performed ancillary services. That approach would enable solicitors to side-step all statutory controls in respect of contingency fee agreements by not going on the record and instead assisting or supporting other solicitors who were on the record. The true distinction was between solicitors and others having the right to conduct litigation and those who did not. Litigation services, as defined in section 119 of the 1990 Act, covered “any services which it would be reasonable to expect a person who was exercising, or contemplating exercising, a right to conduct litigation in relation to any proceedings or contemplated proceedings, to provide.” That covered the ancillary services performed by the respondent in the company litigation. A solicitor’s role was to advise his client with a clear eye and an unbiased judgment, which was equally pertinent even if the solicitor was not in overall control of the litigation: Awwad v Geraghty (a firm) [2001] QB 570 and R (on the application of Factortame Ltd) v Secretary of State for Transport, Local Government and the Regions (No 8) [2002] EWCA Civ 932; [2003] QB 381 applied. The respondent had acted as a solicitor and some of its activities, such as drafting instructions to counsel to advise on the litigation and drafting witness statements, were the sort of activities that a solicitor exercising the right to conduct litigation would be expected to do. It did not matter that the respondent had not conducted all the litigation services in relation to that litigation. To the extent that it performed tasks ancillary to the litigation that would otherwise have been carried out by the company’s solicitor, it was exercising the right to conduct litigation, at least in part, and hence providing litigation services. Since its fees were payable only in the specified circumstances that the appellants made recoveries, the August 2002 agreement was a conditional fee agreement within section 58(2) of the 1990 Act. Accordingly, the manner of performance of the retainer of August 2002 turned the contract into one that the law would not enforce. It followed that the respondent was not entitled to enforce the retainer agreement in the events that had happened. Justin Fenwick QC and Lucy Colter (instructed by K&L Gates LLP) appeared for the appellants; John Randall QC and Dominic Roberts (instructed by Clyde & Co LLP) appeared for the respondents.   Sally Dobson, barrister